# The Allstate Corporation (NYSE: ALL) — Business Narrative, Third Quarter 2026 Sources: the FY2025 Form 10-K (accession 0000899051-26-000031, filed February 20, 2026) for the business description, risk factors and full-year discussion; the Form 10-Q for the quarter ended September 30, 2026 (accession 0000899051-26-000157, filed November 4, 2026) and the third-quarter 2026 earnings release furnished as Exhibit 99.1 to the Form 8-K of the same date (accession 0000899051-26-000156) for the current quarter and post-period developments. All amounts are in US dollars. ## Business *From the FY2025 Form 10-K, accession 0000899051-26-000031.* Allstate is one of the largest publicly held personal lines insurers in the United States. Its core business sells private passenger auto, homeowners and other personal property-liability insurance to consumers in all 50 states, the District of Columbia and Canada, through exclusive Allstate agents, independent agents, contact centers and online, under the Allstate, National General, Direct Auto and Answer Financial brands. Most of its revenue is insurance premiums: the Allstate Protection segment produced 93.9% of 2025 consolidated insurance premiums and contract charges. The rest comes from the Protection Services businesses (consumer product protection plans, roadside assistance, dealer products, identity protection and telematics data) and from investment income on an $83.24 billion portfolio at the end of 2025. By A.M. Best's ranking of 2024 statutory direct premiums written, it is the third-largest personal property and casualty insurer in the US. At year-end 2025 it had about 211 million policies in force and roughly 53,000 full-time employees. The company has four reportable segments: - **Allstate Protection.** Auto, homeowners, specialty personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and others) and commercial auto. It accounts for 18.1% of year-end 2025 policies in force. Distribution runs through more than 27,400 exclusive agents and licensed sales professionals, about 58,700 independent agent locations, and about 2,200 direct-channel sales representatives, plus about 500 Direct Auto retail stores. Allstate no longer writes Allstate-brand commercial policies; commercial growth is focused on National General commercial auto. - **Protection Services.** Five businesses: Protection Plans (protection plans for phones, electronics, appliances and furniture, sold through retailers and mobile operators in North America, Europe and Asia), Roadside, Dealer Services (vehicle service contracts, GAP waivers and similar products sold through auto dealers), Identity Protection, and Arity (telematics-based mobility data, risk scoring and lead generation). The segment holds 81.6% of policies in force but produced only 5.0% of 2025 total revenue. - **Run-off Property-Liability.** Asbestos, environmental and other claims from commercial and reinsurance policies written from the 1960s to the mid-1980s, managed by a dedicated claims group. At year-end 2025, 66% of gross case reserves on the run-off direct excess commercial business were covered by settlement agreements. - **Corporate.** Holding company activities and certain non-insurance operations. In 2025 Allstate exited employer voluntary benefits and group health (see MD&A below). The retained individual health business is no longer a reportable segment. **Strategy.** The strategy has two parts: grow personal property-liability market share, and expand protection offerings using the Allstate brand, customer base and capabilities. In personal lines this is the "Transformative Growth" program. Its aim is to become a low-cost, digital provider of "Affordable, Simple and Connected" products. The program has five parts: improving customer value, expanding customer access, increasing sophistication in customer acquisition, deploying a new technology ecosystem (including generative and agentic AI), and organizational transformation. At year-end 2025, the new Affordable, Simple and Connected auto and homeowners products were available in 43 and 31 states, with rollout completion targeted for 2026. National General's Custom360 products for independent agents were in 36 states. **Pricing and catastrophe management.** Allstate prices with proprietary loss data and telematics (Drivewise, Milewise and DynamicDrive) and seeks rate increases to keep pace with loss-cost trends, including catastrophe and weather losses. Since 2007 it has cut its homeowners exposure in California by more than 50%. It stopped writing new homeowners and condominium business in California in 2022, stopped new condominium business in Florida in 2022 and new homeowners business there in 2023, and writes higher-risk property through its excess and surplus lines carrier, North Light Specialty Insurance Company. At December 31, 2025, the modeled 1-in-100 probable maximum loss for hurricane, earthquake and wildfire was about $3.1 billion, net of reinsurance. The property catastrophe reinsurance program cost $1.23 billion in 2025, up from $1.11 billion in 2024. **Regulation.** Insurance is regulated mainly at the state level, covering rates, policy forms, solvency, investments, claims practices and market exits. Rates need prior approval in 21 locations for auto and 20 for home, and most others use file-and-use or use-and-file systems. Insurers must also take part in assigned-risk plans, state FAIR plans, guaranty funds and state indemnification programs; the largest is the Michigan Catastrophic Claims Association. The parent is a holding company. It depends on dividends from Allstate Insurance Company, which Illinois law limits to formula amounts based on statutory income and surplus. ## Risk Factors *From the FY2025 Form 10-K, accession 0000899051-26-000031, Item 1A. The third-quarter 2026 Form 10-Q reports no material changes.* Insurance and financial services: - **Reserve adequacy.** Claim reserves are estimates built on the assumption that past development patterns will continue. Inflation, court decisions, tariffs, supply-chain disruption and changes in claim reporting can push ultimate costs well above recorded reserves. - **Claim frequency and severity.** Bodily-injury severity is rising with attorney representation and medical consumption. Vehicle repair costs are rising with tariffs, labor rates, embedded driver-assistance sensors and a higher share of total losses. Homeowners severity tracks construction and materials inflation. - **Catastrophes and climate.** Wind and hail, wildfires, hurricanes, earthquakes, winter storms and man-made events can produce losses above prior experience, pricing assumptions, model estimates or reinsurance limits. Climate change may raise the frequency and severity of these events and the cost of reinsurance. The catastrophe models themselves may misjudge exposure. - **Rate regulation.** Prior-approval regimes, profit caps in some states and limits on rating variables or AI and large-language-model tools can delay or block needed rate increases. Mandatory participation in residual markets and limits on withdrawing from states can force business to be written at inadequate rates. - **Investments.** Interest-rate, credit-spread, equity and real-estate moves affect income and valuations. Performance-based investments, mainly limited partnerships recorded on a lag, are volatile and illiquid. Fair-value and credit-loss estimates require judgment. - **Indemnification programs and ratings.** Recoveries from the Michigan Catastrophic Claims Association, and the federal flood program Allstate services, depend on those programs' funding. A ratings downgrade would hurt sales, retention and borrowing costs. Business, strategy and operations: - **Competition and technology.** Personal lines are intensely competitive on price, underwriting sophistication and advertising. Driver-assistance systems, autonomous vehicles and ride-sharing could shrink the auto market, and auto is a large share of Allstate's business. Competitors may deploy AI and other technology faster. - **Execution of Transformative Growth.** New products may be less profitable than existing ones or change risk exposure. Catastrophe-driven shrinkage of homeowners books in some states also costs bundled auto business. - **Holding-company and capital constraints.** Regulatory limits on subsidiary dividends, together with preferred-stock and subordinated-debenture terms, can restrict common dividends and buybacks. - **Reinsurance.** Reinsurance capacity and pricing, including the insurance-linked securities market, may tighten. Reinsurers may not pay, especially on run-off asbestos and environmental lines. - **Acquisitions and divestitures.** Integration can fall short, and divested businesses can leave lasting obligations under transition, reinsurance or guarantee arrangements. - **Vendors, cyber and resilience.** Allstate relies on outside vendors for claims, call centers, IT and investment services. It holds large volumes of personal data, which exposes it to ransomware and state-sponsored attacks, and it must be able to restore operations after a major outage. - **Talent.** Competition for underwriting, data, technology and cybersecurity staff is intense. Macro, regulatory and legal environment: - **Economy and markets.** Economic weakness, tariffs and trade policy, inflation, and capital-market disruption affect claims costs, demand (especially for protection plans) and access to credit. - **Regulatory reform.** Changes to FEMA, the federal flood program, or federal weather forecasting and modeling could raise costs. So could new privacy and cybersecurity laws and federal oversight of state insurance regulation. - **Litigation.** Class actions over claims practices, regulatory market-conduct exams and jury-award trends could exceed accruals. - **Other.** Changes in accounting and tax rules (including goodwill impairment and deferred-tax realization), stakeholder expectations on environmental and social matters, and misconduct or fraud by employees, agents or third parties. ## Management's Discussion and Analysis — Fiscal 2025 *From the FY2025 Form 10-K, accession 0000899051-26-000031, Item 7.* Underwriting profit rose sharply in 2025. Net income applicable to common shareholders was $10.17 billion, against $4.55 billion in 2024. The increase came mainly from higher underwriting income and gains on two divestitures. Total revenue rose 5.6% to $67.69 billion on more auto and homeowners policies and earlier rate increases. Net investment income rose $357 million to $3.45 billion on higher market-based and performance-based results. **Property-Liability underwriting.** Underwriting income rose to $8.54 billion from $3.08 billion, and the combined ratio improved to 85.2 from 94.3. Catastrophe losses were essentially flat at $4.96 billion and included $1.05 billion from wildfires. There were no hurricane losses, compared with $1.18 billion in 2024. Prior-year reserve releases of $1.81 billion improved the combined ratio by 3.1 points, compared with 0.5 points in 2024. - **Auto.** Premiums written rose 3.6% ($1.35 billion) to $38.65 billion. Implemented rate increases moderated to 3.5%, for a 2.6% total premium impact. Policies in force grew 2.3% to 25.5 million, and new issued applications rose 25.3% across all three channels. The auto combined ratio improved to 85.0 from 95.0, helped by lower claim frequency and prior-year releases, although report-year severity kept rising on repair costs, total-loss mix, medical consumption and attorney representation. - **Homeowners.** Premiums written rose 14.9% ($2.15 billion) to $16.57 billion. Implemented rate increases of 7.6% produced an estimated 5.1% premium impact, and the Allstate-brand average premium rose 12.0% to $2,263. Policies in force grew 2.5% to 7.7 million, and the homeowners combined ratio improved to 84.4 from 90.1. Allstate still writes no new homeowners business in Florida and had substantially completed targeted non-renewals there. - **Expenses.** The expense ratio eased to 21.4 from 21.7 as premiums grew faster than costs, despite advertising spending of $2.10 billion, up from $1.86 billion. **Protection Services.** Premiums written rose 7.5% to $3.01 billion, mainly from international growth at Protection Plans. Adjusted net income was flat at $218 million, a company non-GAAP measure. Protection Plans earned $179 million, while Arity lost $34 million on higher claims and expenses. Policies in force reached 172 million. **Run-off Property-Liability.** Run-off prior-year reserve reestimates added $151 million in 2025, mostly from the annual reserve review, a 0.2-point effect on the combined ratio. **Divestitures.** On April 1, 2025, Allstate closed the sale of American Heritage Life Insurance Company and American Heritage Service Company, its employer voluntary benefits business, for $1.9 billion in cash. The pre-tax gain was $888 million, or $641 million after tax. On July 1, 2025, it closed the sale of Direct General Life Insurance Company, NSM Sales Corporation and The Association Benefits Solution, LLC, its group health business, for $1.23 billion in cash. The pre-tax gain was $715 million, or $499 million after tax. **Capital and liquidity.** Allstate shareholders' equity rose to $30.61 billion from $21.44 billion. Book value per diluted common share rose 49.9% to $108.45, and return on average common equity was 42.3%. Debt fell to $7.49 billion after the $600 million of 0.75% senior notes matured and were repaid on December 15, 2025. Debt was 24.5% of shareholders' equity, down from 37.7%. During 2025 Allstate: - repurchased 6 million shares for $1.24 billion; - paid $1.04 billion of common dividends and $117 million of preferred dividends; - held $7.52 billion of deployable assets at the parent at year-end; - received $3.95 billion of dividends from Allstate Insurance Company. Estimated statutory surplus was $22.95 billion. Allstate Insurance Company's 2026 dividend capacity without prior approval is estimated at $7.98 billion, less dividends paid in the preceding twelve months. On February 4, 2026, the board authorized a new 24-month, $4.00 billion repurchase program and raised the quarterly dividend to $1.08 from $1.00. Senior debt was rated A3 by Moody's, BBB+ by S&P and a- by A.M. Best. Allstate Insurance Company's financial strength was rated Aa3, A+ and A+ respectively, and Moody's moved its outlook to stable from negative in May 2025. **Tariffs and macro.** Management flagged tariffs announced from April 2025 as a risk to auto parts and vehicle prices, building-material costs, Dealer Services and Protection Plans volumes, and investment valuations, and builds its estimates of tariff effects into reserves. ## Current Quarter — Third Quarter 2026 *From the Form 10-Q for the quarter ended September 30, 2026 (accession 0000899051-26-000157) and the third-quarter earnings release furnished with the Form 8-K of November 4, 2026 (accession 0000899051-26-000156).* Heavy summer storms cut the third quarter's earnings, while policy growth continued. Net income applicable to common shareholders fell to $2.05 billion ($8.03 per diluted share) from $3.72 billion ($13.95) a year earlier. The company attributes the decline to three factors: higher catastrophe losses, the absence of the gain on the 2025 group health sale ($720 million of gain on disposition of operations in the third quarter of 2025), and $545 million of net investment losses against $252 million of gains a year earlier. Adjusted net income, a company non-GAAP measure, was $2.49 billion ($9.76 per share) against $2.98 billion. Revenue rose 0.5% to $17.35 billion. For the first nine months, net income applicable to common shareholders rose to $7.72 billion ($29.79 per diluted share) from $6.36 billion, and revenue rose 5.1% to $52.89 billion. **Catastrophes.** Third-quarter catastrophe losses were $1.65 billion, against $558 million a year earlier. The company attributes them to two large wind and hail events plus more frequent smaller events. The losses were July $682 million and August $748 million, according to monthly releases, with $220 million in September. Year-to-date catastrophe losses of $4.61 billion were slightly below 2025, which had included $1.11 billion from the January 2025 California wildfires. Allstate is pursuing subrogation for those wildfires, and any recovery would mainly benefit its reinsurers. The modeled 1-in-100 probable maximum loss was about $3.3 billion net of reinsurance at September 30, 2026, and property catastrophe reinsurance cost $1.04 billion through nine months. **Property-Liability.** Premiums earned rose 3.8% to $15.09 billion and premiums written rose 2.5% to $16.02 billion. The recorded combined ratio rose to 86.6 from 80.1; the underlying combined ratio, a company non-GAAP measure excluding catastrophes, prior-year reserve changes and intangibles amortization, rose to 80.5 from 78.7. Underwriting income fell to $2.02 billion from $2.89 billion. Policies in force grew 3.3% to 39.3 million. - **Auto.** Policies in force grew 3.4% to 26.2 million and new issued applications rose 6.3%, led by the independent agency (+11.4%) and direct (+9.6%) channels. Premiums written were flat (+0.2%) because the Allstate-brand average premium fell 4.9% to $811, reflecting the shift toward the new Affordable, Simple and Connected products. The recorded combined ratio was 83.2, against 82.0. The underlying ratio rose to 89.8 from 86.0, as report-year severity kept rising on medical costs and attorney representation. Large prior-year releases offset much of the increase: $884 million in auto, including $802 million from auto injury coverages. - **Homeowners.** Premiums written rose 7.4% and premiums earned rose 11.5%. The Allstate-brand average premium rose 4.9% to $2,408, policies in force grew 3.3% to 7.9 million, and new issued applications rose 10.2%. Catastrophe losses of $1.33 billion, against $479 million, lifted the combined ratio to 89.5 from 71.5, while the underlying ratio held near 60 (60.1, against 59.8). Implemented rate increases were 4.8% through nine months, for a 1.8% premium impact, against 7.6% for full-year 2025. Allstate completed targeted Florida homeowners and condominium non-renewals in the second quarter of 2026 and writes only limited new California homeowners business through North Light. - **Reserves and expenses.** Prior-year reserve releases reduced Allstate Protection reserves by $969 million in the quarter and $2.61 billion through nine months. The expense ratio edged up to 22.0 from 21.8 on higher acquisition-cost amortization, employee costs and restructuring. Restructuring charges were $40 million in the quarter. - **Run-off.** The annual review increased run-off reserves by $216 million, against $146 million in 2025. Higher asbestos claim frequency and severity, plus emerging environmental and mass-tort claims, drove the increase. **Product rollout.** As of the November 4, 2026 earnings release, the Affordable, Simple and Connected auto product was available in 46 states and the homeowners product in 42. Custom360 auto and homeowners products for independent agents were in 41 and 42 states respectively. Management also cited the expansion of its AI-based "Allstate Large Language Intelligent Ecosystem" (ALLIE), which now handles millions of service calls. **Protection Services.** Revenue rose 6.9% to $964 million and adjusted net income rose to $64 million from $46 million. Protection Plans led the gain, with revenue up 7.3% to $631 million and adjusted net income up to $47 million from $34 million on higher gross margins and lower operating expenses. Roadside revenue rose 18.6% to $70 million on bundling with the new auto products. Arity revenue rose 11.8% to $76 million on lead-generation advertising, with a $6 million adjusted loss. Segment policies in force reached 177.8 million, and total company policies in force were 217.6 million, up 3.9%. **Investments.** Net investment income rose $228 million to $1.18 billion. Market-based income rose to $887 million on larger balances and higher fixed-income yields. Performance-based income rose to $355 million on private-equity valuation gains. Rising interest rates produced net investment losses of $545 million and pushed unrealized net capital losses to $2.6 billion pre-tax, compared with $97 million at June 30. The portfolio's total return was negative 2.1% for the quarter. Investments totaled $87.38 billion. **Capital.** Shareholders' equity was $32.31 billion. Book value per diluted common share was $120.23, up 25.3% from a year earlier, and trailing-twelve-month return on common equity was 41.3%. Allstate returned about $1.5 billion to shareholders in the quarter. Through nine months it: - repurchased 13 million shares (4.9% of year-end 2025 shares outstanding) for $2.91 billion, including 4.94 million shares in the third quarter at an average $252.44; - left $1.35 billion unused under the $4.00 billion authorization, which must be completed by February 29, 2028; - paid common dividends of $1.00 (January 2), $1.08 (April 1) and $1.08 (July 1); - received $4.75 billion of dividends from Allstate Insurance Company. At September 30 the parent held $9.04 billion of investments. Debt was $7.49 billion, or 23.2% of equity, with $550 million maturing in December 2026. In August 2026, S&P changed its outlook on Allstate's ratings to positive from stable, and A.M. Best affirmed its ratings in September. **Management and outlook.** Christian Lown, formerly CFO of CoStar Group, became Executive Vice President and Chief Financial Officer on August 3, 2026. He succeeded Jess Merten, who was named President of Property-Liability in October 2025; John Dugenske, President, Investments and Corporate Strategy, served as interim CFO until Lown joined (8-K accession 0000899051-26-000109). The filings contain no numeric earnings guidance. Management says it will keep taking rate where needed to keep pace with costs and pursue rate adjustments where returns are acceptable. It flags tariffs, military conflicts and higher oil prices as potential drivers of higher auto and homeowners severity and operating costs. **Legal.** In July 2026 the Oklahoma Attorney General sued Allstate over its homeowners insurance practices under state consumer-protection and racketeering statutes. Courts have approved settlements in the Katz (total-loss valuation; preliminary approval) and Loughran (uninsured-motorist limits; final approval) cases. On September 10, 2026, a court decertified the class in the Canchola agent-misclassification suit, and the plaintiffs are appealing. Other pending matters include a Department of Justice suit against National General, and a suit by the Texas Attorney General and putative class actions over the collection and use of driving-behavior data. Allstate estimates the aggregate reasonably possible loss above accruals for disclosed matters at zero to $137 million pre-tax. ## Subsequent Events *From the Form 10-Q for the quarter ended September 30, 2026 (accession 0000899051-26-000157, MD&A "Acquisitions") and the earnings release furnished with the Form 8-K of November 4, 2026 (accession 0000899051-26-000156).* The quarterly report has no stand-alone subsequent-events note. It discloses two post-quarter transactions, both by Arity, the telematics and mobility-data business in Protection Services: - **INRIX, Inc. (completed October 2026).** Arity acquired substantially all of the assets of INRIX, Inc., a provider of transportation intelligence and mobility analytics, to expand its mobility data and analytics capabilities. **No purchase price was disclosed.** The company states that certain acquisition-related disclosures are not yet available because of the timing of the transaction. - **Replica (agreement signed November 2026).** Arity signed a definitive agreement to acquire the remaining ownership of Replica, a mobility data and technology company. The wording indicates Arity already held a stake. Closing is expected before the end of 2026, subject to customary conditions. **No purchase price or stake size was disclosed.** Other post-quarter items: the quarterly common dividend of $1.08, declared July 8, 2026, was paid on October 1, 2026. The company reported 247,449,496 common shares outstanding as of October 19, 2026, against about 248.8 million at September 30.